The debt limit farce

One part of the president’s proposal on the “fiscal cliff” is that in the future the debt ceiling can be raised by the president alone (subject to reversal by law).

My first reaction to this was negative because it seemed to transfer a lot of power to the president.  While the Congress could override his decision by law he could in turn veto the legislation and Congress could have its way only if it obtained a two thirds majority in both houses to override the veto.  That would mean that the president could set the debt limit if he had the support of one third + 1 of just one house of congress.  Essentially that would be a complete transfer to the president while the congress would only be able to posture extensively about it to no effect except to further poison the political well.

As I understand it the national debt comes in two parts:  The public debt - treasury notes that are sold on the market - and the agency debt –the amounts that accumulate in agency accounts, e.g. SS, and are used to buy treasury notes.  If that is correct, then you could be in the ironic situation in which a sudden influx of money into one of those government accounts could trigger the need to raise the debt limit.

So what is this debt limit anyway?  Why do we need it?  After all, any expenditures have to be approved by congress anyway, so what it the point?  It seems that the point is more symbolic than anything else.  It is to remind us that we are still a frugal nation - long after we quit that and became more profligate than a drunken sailor.  Apparently the conservatives view it as way to control spending.  The debate last time led to all sorts of claims about what would happen if we didn’t raise the debt limit.  (It was claimed that the reduction in our credit rating was because we were debating whether or not to raise the debt limit.  I would think that annual deficits of 6% of GDP with no end in sight may have been a factor in the credit rating reduction.)  It seems to me that there are 4 ways to  deal with getting close to the debt limit: 1.  Default on our loans and obligations, 2.  Raise taxes, 3. Reduce spending, or 4. Raise the debt limit.  The Republicans are unwilling to raise taxes and the Democrats are unwilling to cut spending so the public presentation of the problem is: raise the debt limit or default. 

In practice no one can long oppose the raising of the debt limit.  Do so and you will very soon be labeled as someone holding the ‘full faith and credit' of the United States as a "hostage" to get whatever it is you want.

I think that the conservatives should give up trying to use the debt limit to control spending.

and

We should recognize that the debt limit is a sham and either abolish it or let the President set it.